Q1 FY10 Press Release FINAL by WidnesVikings

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									       SAIC ANNOUNCES FINANCIAL RESULTS FOR FIRST
              QUARTER OF FISCAL YEAR 2010
   •    Revenues: Up 12 percent (11 percent internal) to $2.65 billion
   •    Operating Income: Up 17 percent to $204 million
   •    Diluted EPS from Continuing Operations: Up 16 percent to $0.29
   •    Reaffirming Guidance for Fiscal Year 2010

(SAN DIEGO and MCLEAN, VA) June 3, 2009 – SAIC, Inc. (NYSE: SAI), a scientific,
engineering, and technology applications company, today announced financial results for the
first quarter of fiscal year 2010, which ended April 30, 2009.
After the quarter ended, the U.S. Department of Defense indicated that it intends to restructure
the Future Combat Systems (FCS) program, which represents about 3 percent of the company’s
annual revenue. The company currently expects to have a significant role under the restructured
program, but the level of effort and terms and conditions remain under negotiation.
“In the first quarter of fiscal year 2010, we continued to demonstrate a pattern of solid program
execution and financial performance,” said Ken Dahlberg, SAIC chairman and chief executive
officer. “I am especially pleased that the results were so uniformly positive. That is, all of our
major metrics—revenue, operating margin, earnings per share, and cash flow—were robust, and
virtually all of our business units met or exceeded our expectations. Although the potential
restructuring of FCS provides some uncertainty, based on our strong market position across our
wide business base, we expect fiscal year 2010 to be another solid year for the company.”
Summary Operating Results
Revenues for the quarter were $2.65 billion, up 12 percent from $2.37 billion in the first quarter
of fiscal year 2009. Internal, or non-acquisition, growth represented 11 percentage points of the
consolidated growth for the quarter. Key drivers of internal growth included the initial ramp of
recent wins in defense logistics, information technology, cyber-security, and intelligence support
as well as increased tasking on existing defense and intelligence programs.
Operating income for the quarter was $204 million (7.7 percent of revenue), up 17 percent from
$174 million (7.4 percent of revenue) in the first quarter of fiscal year 2009. Growth in quarterly
operating margin percentage was driven by continued improvements in cost efficiency and
contract fees. Income from continuing operations for the quarter was $117 million, up 11
percent from $105 million in the first quarter of fiscal year 2009. Income from continuing
operations grew more slowly than operating income primarily because of a $7 million reduction
in interest income net of interest expense and a $5 million reduction in other income resulting
from joint venture activities and a gain on the sale of two venture capital portfolio investments in
the year-ago period.
Diluted earnings per share (EPS) from continuing operations for the quarter were $0.29, up 16
percent from $0.25 in the first quarter of fiscal year 2009, driven by the increase in income from
continuing operations and a lower share count compared to the prior year quarter. The diluted
share count for the quarter was 397 million, down 3 percent from 410 million in the first quarter
of fiscal year 2009, due primarily to share repurchases made over the last four quarters. Diluted
earnings per share, which include discontinued operations, were $0.28 for the quarter, up 17
percent from $0.24 in the first quarter of fiscal year 2009. Discontinued operations include
Telcordia Technologies, Inc., which was sold in the first quarter of fiscal year 2006, and the
Applied Marine Technology, Inc. products business, which was sold in the first quarter of fiscal
year 2010.
Earnings per share and share count figures quoted for fiscal year 2009 differ from those cited
previously because on February 1, 2009, the company adopted Financial Accounting Standards
Board (FASB) Staff Position (FSP) No. EITF 03-6-1 “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,” which requires
retrospective application to prior periods. Upon adoption, basic EPS from continuing operations,
basic EPS, diluted EPS from discontinued operations and diluted EPS for the three months ended
April 30, 2008 each decreased by $0.01. The new methodology had a similarly dilutive effect
for the three months ended April 30, 2009.
Cash Generation and Capital Deployment
Cash flow from operations for the quarter was $163 million (or 1.4 times income from
continuing operations) compared to $14 million in the first quarter of fiscal year 2009. Cash
collections continued to be strong as days sales outstanding (DSO) were 68 days, flat
sequentially and an improvement of five days year-over-year.
During the quarter, the company used $223 million to repurchase approximately 12 million
common shares including 11 million under the company’s stock repurchase program and the
remainder in recurring repurchases from employees in settlement of withholding taxes associated
with stock option exercises and vesting events. Whether any future repurchases are made and
the timing and actual number of shares repurchased under the stock repurchase program will
depend on a variety of factors, including share price, corporate capital requirements, and other
market conditions. As of April 30, 2009, the company had $898 million in cash and cash
equivalents and $1.1 billion in long-term debt.
New Business Awards
Net new business bookings totaled $2.6 billion in the first quarter, representing a book-to-bill
ratio of 1.0. Net bookings are calculated as the current period ending backlog plus the current
period’s revenue less prior period ending backlog and backlog obtained in acquisitions. No
bookings value is assigned unless the company has received a signed contract for a priced
statement of work.
Large, competitive definite delivery contract awards received during the quarter include:
   •   Armed Forces Health Longitudinal Technology Application/Composite Health Care
       System (AHLTA/CHCS) Support. Under a 30-month, $158 million task order, SAIC
       will provide engineering, logistics and sustainment support to AHLTA/CHCS to ensure
       the quality care of 9.4 million beneficiaries at more than 135 Military Treatment
       Facilities worldwide. Together, the AHLTA electronic health record and the CHCS
       integrated hospital information system enable the Military Health System to track clinical
       care and exposures of deployed units, monitor demand-management effectiveness, better
       understand disease prevalence and prevention, and study both clinical and management
       outcomes.
   •   Tactical Biometrics Systems (TBS) Support. SAIC was awarded a subcontract by
       Sensor Technologies Incorporated to support the U.S. Army Communications and
       Electronics Command by providing operations and user maintenance support to TBS.
       SAIC’s subcontract has a four-year period of performance and a total contract value of
       more than $115 million. TBS devices collect fingerprints, iris scans, facial photos and
       biographical information on persons of interest. The biometric data is then matched
       against a database, potentially identifying wanted or dangerous persons. SAIC will
       provide operations and user maintenance support to help ensure continued, reliable
       technical support of TBS systems, peripherals and networks.
   •   Center for Domestic Preparedness (CDP) Support. SAIC received a five-year, $104
       million contract from the Department of Homeland Security to provide training support
       to the CDP. CDP offers all-hazards training at the only federally chartered weapons of
       mass destruction training center, catering to emergency responders from all 50 states, the
       District of Columbia, and the U.S. territories. SAIC will design and develop emergency
       responder curriculum, provide qualified instructors to teach each course, and manage
       training logistics and sustainment activities.
   •   U.S. Joint Forces Command (USJFCOM) Joint Capability Development Directorate
       (J8) Support. Under a five-year, $81 million task order, SAIC will support USJFCOM
       J8 in the areas of engineering, analysis, test, and evaluation. SAIC will perform work in
       the areas of command and control, capability engineering, system engineering and
       integration, capability portfolio management, and net-enabled command capability to
       help address the complex challenges associated with joint capability development.
   •   Hawaii Energy Efficiency Program Administration. SAIC was awarded a contract to
       administer the rate-payer funded Hawaii Energy Efficiency Program, helping Hawaiian
       residents and businesses become more energy efficient. The contract potentially runs
       through 2016; the contract has a value of $38 million for the first two years. SAIC will
       provide program design and implementation, customer incentives and rebates, new
       initiatives, interface with the Hawaii Clean Energy Initiative, and manage efforts
       concerning commercial, industrial, residential, and renewable energy programs.
In addition, SAIC also won several indefinite delivery/indefinite quantity (IDIQ) contracts that
are not included in net bookings. The most notable IDIQ awards during the quarter were:
   •   General Services Administration (GSA) Alliant. SAIC was awarded a prime contract
       on the Alliant government-wide acquisition contract from the GSA. Alliant is a multiple-
       award contract with a 10-year period of performance and a total ceiling value for all
       awardees of $50 billion. The scope of work includes all components of an integrated
       information technology solution, including future technologies that may emerge during
       the life of the contract.
   •   Simulation and Training Omnibus Contract (STOC II). SAIC will provide
       simulation, training and instrumentation services and products under STOC II, which was
       awarded by the U.S. Army’s Program Executive Office for Simulation Training and
       Instrumentation (PEO STRI). This ten-year, multiple-award contract has a total ceiling
       value of $17.5 billion for all awardees. SAIC will perform a full range of life cycle
       management to include front end analysis, design, development, fielding, and
       sustainment of training and testing systems, instrumentation, and gaming system
       simulators.
   •   U.S. Strategic Command (USSTRATCOM) Support Services. SAIC received a
       contract to provide technical analysis and studies for programs and strategies for
       USSTRATCOM. This multiple-award contract has a five-year period of performance
       and a ceiling value of $900 million for all awardees. USSTRATCOM’s missions include
       Space Operations; Cyberspace Operations; Strategic Deterrence; Combating Weapons of
       Mass Destruction; Global Command and Control; Global Strike and Integration;
       Information Operations; Integrated Missile Defense; and Intelligence, Surveillance and
       Reconnaissance.
The company’s backlog of signed business orders at the end of the first quarter of fiscal year
2010 was $16.7 billion, of which $5.7 billion was funded. As compared to the end of the first
quarter of fiscal year 2009, total backlog increased 11 percent and funded backlog increased 6
percent. The negotiated unfunded backlog of $11.0 billion represents the estimated amount to be
earned in the future from firm orders for which funding has not been appropriated or otherwise
authorized and unexercised priced contract options. Negotiated unfunded backlog does not
include any estimate of future expected task orders to be awarded under IDIQ or other master
agreement contract vehicles.
Included within the backlog is approximately $0.1 billion in funded backlog and $1.0 billion in
negotiated unfunded backlog related to FCS through the current contract end date of December
31, 2014. The company expects that it will soon stop work on the manned ground vehicle
component of FCS but continue work on the system-of-systems integration component and the
new technology spin-outs under a new or modified contract. The company expects that
approximately $0.2 billion of the FCS backlog will be recognized as revenues throughout the
remainder of fiscal 2010.
Forward Guidance
Despite the FCS developments, SAIC maintains a healthy backlog and a strong market position
across its wide business base. Absent further disruptions in government funding, the company
currently expects to achieve all of its long-term, average annual financial goals in fiscal year
2010:
   •   Growing revenue internally in the six percent to nine percent range;
   •   Improving operating margin by 20 to 30 basis points until reaching a sustainable level
       between eight percent and nine percent; and
   •   Growing earnings per share from 11 percent to 18 percent.
Mark Sopp, SAIC chief financial officer commented, “The company has built a resilient and
diversified base of business and new opportunities that enables us to reaffirm our expectation
that we will achieve our long-term financial growth goals again in fiscal year 2010 despite the
restructuring of FCS. The strength of this company lies not with one contract, but with
thousands of contracts and 45,000 employees dedicated to solving our customers’ most difficult
problems.”
About SAIC
SAIC is a FORTUNE 500® scientific, engineering, and technology applications company that
uses its deep domain knowledge to solve problems of vital importance to the nation and the
world, in national security, energy and the environment, critical infrastructure, and health. The
company’s approximately 45,000 employees serve customers in the U.S. Department of Defense,
the intelligence community, the U.S. Department of Homeland Security, other U.S. Government
civil agencies and selected commercial markets. SAIC had annual revenues of $10.1 billion for
its fiscal year ended January 31, 2009. For more information, visit www.saic.com.
SAIC: From Science to Solutions®
Forward-Looking Statements
Certain statements in this release contain or are based on “forward-looking” information within
the meaning of the Private Litigation Reform Act of 1995. In some cases, you can identify
forward-looking statements by words such as “expects,” “intends,” “plans,” “anticipates,”
“believes,” “estimates,” “guidance” and similar words or phrases. Forward-looking statements
in this release include, among others, estimates of future revenues, earnings, backlog,
outstanding shares and cash flows. These statements reflect our belief and assumptions as to
future events that may not prove to be accurate. Actual performance and results may differ
materially from the guidance and other forward-looking statements made in this release
depending on a variety of factors, including: changes in the U.S. Government defense budget or
budgetary priorities or delays in the U.S. budget process; changes in U.S. Government
procurement rules and regulations; our compliance with various U.S. Government and other
government procurement rules and regulations; the outcome of U.S. Government reviews, audits
and investigations of our company; our ability to win contracts with the U.S. Government and
others; our ability to attract, train and retain skilled employees; our ability to maintain
relationships with prime contractors, subcontractors and joint venture partners; our ability to
obtain required security clearances for our employees; our ability to accurately estimate costs
associated with our firm-fixed-price and other contracts; resolution of legal and other disputes
with our customers and others; our ability to successfully acquire and integrate businesses; our
ability to manage risks associated with our international business; our ability to compete with
others in the markets in which we operate; and our ability to execute our business plan
effectively and to overcome these and other known and unknown risks that we face. These are
only some of the factors that may affect the forward-looking statements contained in this release.
For further information concerning risks and uncertainties associated with our business, please
refer to the filings we make from time to time with the SEC, including the “Risk Factors,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
“Legal Proceedings” sections of our latest annual report on Form 10-K and quarterly report on
Form 10-Q, which may be viewed or obtained through the Investor Relations section of our Web
site at www.saic.com.
All information in this release is as of June 3, 2009. SAIC expressly disclaims any duty to
update the guidance or any other forward-looking statement provided in this release to reflect
subsequent events, actual results or changes in the company’s expectations. SAIC also disclaims
any duty to comment upon or correct information that may be contained in reports published by
investment analysts or others.
CONTACTS:
Investor Relations:
Stuart Davis
703-676-2283
stuart.davis@saic.com

Media Relations:
Laura Luke              Melissa Koskovich
703-676-6533            703-676-6762
laura.luke@saic.com     melissa.l.koskovich@saic.com

								
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